Draft Money Bills Amendment Procedure Bill [B75-2008]: Summary of submissions; Draft Financial Management of Parliament Bill [B74-2008]: process

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Finance Standing Committee

06 August 2008
Chairperson: Mr N M Nene (ANC)
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Meeting Summary

Members were given some time before the meeting commenced to study the summary of submissions made in respect of the Draft Money Bills Amendment Procedure and Related matters Bill 2008. Areas of commonality from the submissions were summarised as the fiscal framework; the need to clarify or develop definitions; the issues of committees and co-ordinated committees, the differences between money bills, and other bills, the mediation Committee and impacts upon provinces and municipalities. The degree and content of public participation would commence each year with a statement of public intent. It was necessary then for the Committee to resolve, clarify and identify the budget process, discuss the roles of the committees and their ability to amend the budget. Members first discussed the Fiscal Framework, noting the need for comprehensive definitions to make the process effective. It was agreed that the starting point should be to establish revenue estimates, thereafter deal with estimated expenditure and ratios and provision for contingency reserves. The Executive should provide detailed estimates of their requirements and justify them. Members agreed that various comparisons were important, including tax and gross domestic product; budget and deficit; objectives and achievements; and for this purpose detailed information should be gleaned from a variety of sources and made available, so that proper comparisons could be drawn, assessments made and the situation addressed. A suggestion was made that this be incorporated into the budget Rules, but other Members felt that the Committee should guard against being too prescriptive. A suggestion that inter-sectoral ratios also be obtained was not generally supported. The Fiscal Framework should run parallel to National Treasury processes. Information on inflation was not needed as this could impact upon monetary policy, which was the preserve of the Reserve Bank, but it was necessary to oversee the budget process. Percentages, rather than figures, were required. Other information that could be made available could include the cost of servicing debt, aggregate amounts of income and expenditure, unemployment and associated problems. The drafters were asked to take these views and come up with a draft.

In respect of appropriation, Members suggested that a draft Division of Revenue document would assist the process. The Portfolio Committee could accept, change or amend legislation but a financial bill required a two-thirds majority. It still, however, had the power to comment and express concerns. Fiscal responsibility was raised in the Bill. There were further opportunities during the mid-term budget processes, and this could be used to hold the Executive to account, and to get further information. Appropriations of revenue should be supervised by the Budget Committee, which had an expanded role in the appropriation process, and closer cooperation was now required between the various finance committees. Parliament would be able to address the position further in its own Rules.  It was suggested that a name change to “Appropriation Bill” rather than “Budget” might be appropriate.

Members briefly considered the procedure for the Draft Financial Management of Parliament Bill. The information would be with the Committee by 15 August. The Committee would need to consider the opinions on the separation of powers, as also the carry-over of funding not utilised in one year to the next, and the reservations of the Auditor General.

Meeting report

Draft Money Bills Amendment Procedure and Related Matters Bill 2008
The Chairperson directed the attention of members to the summary which was tabled at the meeting, and requested them to familiarise themselves with this, and also to have regard to the responses by National Treasury (NT), particularly on aspects relating to the Public Finance Management Act (PFMA).

He asked that issues be raised in the order in which they were raised in the submission, even if members had made their own summaries. He allowed some time to Members to study the document.

The Chairperson expressed his opinion that there were areas of commonality from the submissions, which he would summarise as the fiscal framework; the need to clarify or develop definitions; the issues of committees and co-ordinate committees and the differences between money bills, and other bills.

Mr K Moloto (ANC) summarised the task set by the Chairperson as resolution, clarification and identifying the Budget process, the different roles of the various budget committees and their ability to amend the budget. He suggested that Members start with discussion of the aspects around the fiscal framework. 

The Chairperson agreed.

Mr S Marais (DA) said that it seemed to him that what was being discussed was the role of Parliament in the budgetary process . He advanced the proposition that the Committee received submissions, considered them, whereafter the Committee’s considerations were sent again to National Treasury for further, and additional, comment. He submitted that it all came down to a matter of interpretation and that the end result was a re-inventing of the wheel. He submitted that re-inventing the wheel was time consuming and wasteful, and resulted in a Bill being modified before it was even before Parliament.  He suggested that at an early stage a Parliamentary Legal Adviser should provide clarity before the Bill was drafted. He posed the question as to whether in a democratic process Parliament would be able to amend a Bill or re-submit it to a Committee for amendment.

The Chairperson explained that this was the Committee’s own Bill, and that it had identified matters which were reasonable.

Mr N Singh (IFP) proposed that the Committee continue flagging areas of concern. He submitted that he saw the main areas as: the Mediation Committee, the maximum and minimum thresholds, the impact on the provinces and municipalities, and the Budget Committee. He proposed that a list be drawn up and the matters be attended to systematically.

The Chairperson confirmed that mediation had been added and asked whether other Members wished to raise any other issues  to that list..

Ms J Fubbs (ANC)  suggested that the degree and content of public participation in the budget was important, and she suggested that this began with public hearings.

Ms B Hogan (ANC) suggested that this process commence annually with a statement of public intent

The Chairperson stated that it seemed as if the Fiscal Framework and associated and comprehensive definitions were required for the processes to be effective.

Mr Moloto suggested that the might be occasions when the definitions were inadequate and it would be required of the participants to deal with matters in a legalistic sense and to try to achieve a better result. He suggested that a better starting point would be the establishing of the revenue estimates, and thereafter to deal with the estimated expenditure and the debt ratio to income and making of provision for contingency reserves. He asked for an extent of the quantification of the data. He suggested that the Executive should provide an exact, not a sketched, estimate of their requirements and that there must be justification for this.

Ms Hogan agreed with Mr Moloto and added that of importance were the ratios such as between tax and Gross Domestic Product (GDP), the budget and the deficit. She added that such information was available but too often not in the same basket, for it was widely dispersed among bodies and committees. She believed that  Parliament should be provided with the ratios between all such sets of figures so that comparison conclusions could be drawn. She summarised the ratios between the sets of figures were important and it must be established what those ratios were.

The Chairperson suggested that the idea of what was required from the definitions was being clarified.

Mr Marais then added that in addition to the debt and other ratios, what was also required was the comparison between objectives and achievements, so that parliament could ascertain whether objectives had been met, or, if not, who had failed to achieve the objectives and how far they fell short. The question of inflation and its extent could also be determined. He suggested that the Committee could and should incorporate such in the Budgetary Rules. This would then make it easier for Parliament to assess and judge all the necessary features that he and his colleagues on the Committee had set out, as well as pinpoint those areas or departments in which the surpluses and deficits developed. He submitted that the whole process required definition, as did the source of the information, which would have to be validated.

Dr D Gumede (ANC) suggested that the Committee must not be too prescriptive in its approach. Although he agreed that a fiscal framework should be established, he conceded that this might have to be amended in the light of international and South African trends, and that this should be in the Office of the Budget. Decisions had to be ongoing and taken against an inbuilt measure of prudence. He warned against being too cautious in approach.

Another Member agreed with Dr Gumede that there was a need to avoid being too prescriptive but requested that the ratios be closely monitored so that changing trends could be identified and advantage taken of them.

Mr Singh then pointed out that the ratios, in themselves, might be misleading, and that the ratios had to be viewed against inter-sectoral ratios as well. He suggested that the comparisons between Education and Agriculture, to cite an example, might be interesting and revealing, as would a comparison between Province and Municipal allocations and achievements by the province or municipality concerned in achieving or failing to achieve such ratios of performance.

The Chairperson thought that this might be going too far.

Ms Fubbs suggested that the principles of the allocations and ratios were more important than the amounts, which could be expected to change annually.

Ms Hogan submitted that there was no desire to destroy the Fiscal Framework. This framework must not be developed in competition with National Treasury  (NT) but rather in parallel with it. The aggregate of funds voted for and the ratios between department and other allocations, and achievements of such targets, should appear. The information supplied should be sufficient that Committee Members could see that the budget deficit was at the certain percentage, and be able to know why this was so. She suggested that calling in information on inflation would have an impact upon monetary policy. This should, in terms of the Constitution, remain the preserve of the S A Reserve Bank, which was charged with overseeing monetary policy. She suggested that it was neither important nor desirable to enter into the debate about macro economic policy but that there was a need to competently oversee the budgetary process. She suggested that to do this did require a Fiscal Framework

Mr Moloto stated that he too was not anxious to acquire the actual figures, but rather the percentages, from which conclusions could be drawn, and decisions made on who was responsible for deviations from the desired objectives.

The Chairperson commented that he felt that an idea of Fiscal Framework was emerging.

Ms Fubbs added that she felt the expense of servicing debt and the debt charges should also appear, and that Parliament should have the right to override decisions made.

The Chairperson suggested that whatever information was made available should include other issues such as the aggregate amounts of income and expenditure.

Ms Hogan concurred.

The Chairperson suggested that the matters advanced  by Members should be given to the Legal Advisers for incorporation in another draft.

Mr Moloto then asked about the figures of the unemployed, inflation and associated problems and the consequent ratios. He submitted that these were equity questions that must be attended to on an equitable basis.

The Chairperson suggested that Members should then discuss appropriation, after establishment of the income..

Mr Moloto and the Chairperson had an exchange of opinion about going into other aspects of the budgetary process at this stage. The phrase was coined that it was necessary to decide which came first: the envelope or pushing the envelope.

Mr Frankie Jenkins, Parliamentary Legal Adviser, then advised that although the drawing up or drafting of the Fiscal Framework was important, the appropriation was equally important. He gave an example that Parliament could amend Bills, but, in terms of the Constitution, could not amend tax Bills.

Ms Fubbs conceded that this was so, but stated that if the destination of the money raised was known, it would make it easier to deal with the raising of the money. The drafting would be easier if the Division of Revenue was known.

Ms Hogan suggested that a draft Division of Revenue document (DORA in common parlance) would assist the process. She pointed out that the Portfolio Committee on Finance had the power to change but not amend the revenue base.

Following further interchange between the members, Ms Hogan pointed out that a portfolio Committee could accept, change or amend legislation by means of a simple majority, but a financial bill required a two-thirds majority. She wondered whether this should not be incorporated here as a safeguard.

The Chairperson questioned whether this was in the power of the Committee.

Mr Jenkins advised that the Committee had the power to set it own limits for a majority.

Ms L Mabe (ANC) asked about foreseeability, and when it was anticipated that this would be done.

Ms A Folscher, Advisor/Consultant to the Portfolio Committee on Finance, suggested that this would require a trade-off. This would be required annually or before each budget.

Mr M Johnson (ANC) suggested that this question could be deferred to Tuesday’s meeting. He personally would favour a two-thirds majority. He wondered if he could get consensus on this. He also raised the possibility of any variables.

The Chairperson said the Fiscal Framework and the need for Fiscal responsibility had now clearly been established. The question of the Rules was still to be decided. He suggested that perhaps this could be referred to the National Treasury

Mr Johnson referred to the submission by National Treasury on page 10 of the document, and said that there were certain key issues advanced by NT. These included the debt levels and the requirement that these be set at prudent levels. He asked whether this applied across the financial sector.

Ms Folscher replied that it applied to growth, and to the levels of debt, equity and service delivery, and growth possibilities.

Ms Fubbs said it seemed to be the other side of the coin.

Mr Johnson said that financial constraints appeared to discount populism, and that the levels in every sphere had to be established in conjunction with National Treasury.

Ms M Mbili (ANC) observed that a Fiscal Framework might then not be acceptable.

Ms Fubbs agreed and said that it seemed to her that there were difficult roles to follow, and that NT might have an overriding role.

Ms Hogan said that Parliament still had “two bites at the cherry” in the process. Parliament would be able to influence, but not change, fiscal legislation although it would be able to express its concerns.

Mr Jenkins pointed out that the need for fiscal responsibility was mentioned in two places in the Bill and that Parliament could apply fiscal responsibility but was bound by the provisions of DORA.

Ms Hogan pointed out that Parliament did have a greater opportunity during the debate on the Mid Term Budget process, as there was an opportunity for full questioning and investigation. It was true that it lasted for one year only, but this process occurred annually, and it was at this juncture that Parliament had the opportunity to present the Executive with its wishes.

Ms Folscher averred that this approach was correct and was applicable to the whole Bill, not merely clauses of it. Every June, there was a further opportunity to hold the Executive to account. The debt levels questioning provided another opportunity.

The Chairperson asked that these points be noted.

Ms Mbili said that responsibility went two ways, and not only to the Executive.

Ms Fubbs said that this was so in the broad reading. Ms Hogan had commented that the Portfolio Committee on Finance had to co-operate with the NCOP, as envisaged in section 4.

Mr Moloto said it was clear that the appropriations of revenue should be supervised by the Budget Committee, which had an expanded role in the budgetary Appropriation process.

Ms Hogan said it seemed to her that closer co-operation was now required between the Portfolio and the Select Committees on Finance than had happened in the past. .

Ms Fubbs said that it seemed to her that the Committees were acting with parallel powers but now had to liaise more closely one with the other.

Ms Folscher warned that there might be a confusion of economic and political powers

Mr Jenkins said that the Bill was specific but that the power lay in the Rules of the Committees.

Ms Mabe said that she thought Parliament should be presented with a draft DORA, and it seemed to her that this question had only arisen because the Auditor General had raised it. If need be there should be legislation to cover and enable this position.

Mr S Asiya (ANC) asked whether the problems could not be resolved by Rules. Parliament had the right to make its own rules regarding procedure, and this could surely be done if the Committee wished to do so. 

Mr Moloto observed that the principles of the Public Finance Management Act  (PFMA) should be applied in the financial management of Parliament.

Mr Jenkins provided illustrations of other Committees, such as the Intelligence Committee, which had ascribed to itself certain powers outside those generally accorded to Committees. He added that such stratagems might be considered and expanded if necessary. He felt that the Fiscal Framework should be referred to the legal drafters.

Ms Folscher said that it appeared that the intention was to have two committees; one for appropriation and the other to consider macro economics or revenue, with appropriate powers

The Chairperson felt that a good point had been reached. The mid-term budget process could be utilised more as interchange mechanism with the Executive on finances.

The Chairperson confirmed that the matter was now being referred to the drafters, and he mentioned a deadline of 15 August.

The Chairperson asked that the following deliberations focus on sequencing tax, and a Statement of Intent.

Ms Hogan said that she felt a name change to Appropriation Bill, rather then Budget, was appropriate. If the sequencing of the notification, obtaining of submissions, and attendance to work was approached differently, within tighter time frames, and was attended to annually then both the Standing Committee on Public Accounts (SCOPA) and the Auditor General (AG) would be satisfied, especially if there was an effective report from each department. An intent to spend should be obtained from each department in order to monitor it.

Mr Marais said that this could be incorporated with the three year budget process.

Mr Singh reminded Members that the allocation of revenue was a political process but that the utilisation of it was a departmental process or initiative

Mr Asiya said that it seemed to him that it was a question of performance evaluation, and some degree of familiarity with the operations was required to conduct this evaluation. He noted that the Portfolio Committee for Correctional Services had investigated escapes from prison, but no member of the Committee had knowledge of or any appreciation of how exactly a prisoner had greased his body to escape through the bars. Mr Asiya suggested it was a matter of skills creation.

Ms Folscher suggested that it was not right to ask for specific information but to establish the principle, and by this it would be possible to obtain information in advance.

Ms Fubbs then said that the July and October mid-term budget process should give the Committee members sufficient time to ask the questions and extract the information, so that if necessary the adjustments could be made.

Draft Financial Management of Parliament Bill
The Chairperson read out a letter from the Secretary of Parliament, apologising for the lateness in replying to a request, and undertaking to have the information provided by 15 August.

Mr Jenkins reminded Members that they had met on 25 June 2008 in order to discuss the financing of Parliament. There were opinions from Professors Christina Murray and Paul Benjamin, indicating that the financing of Parliament gave rise to constitutional questions about the separation of powers. That was dealt with under the clause 3 submissions in the National Treasury document. He suggested that this be flagged for attention.

Mr Singh reminded Members that the question should be reviewed in the light of the principles set out in the PFMA.

Mr Jenkins then reminded Members that in terms of the PMFA any monies not utilised in one year could be retained, with a consequent drop of funding in the next year, but that the Auditor General had reservations about this approach as it did not apply to other departments.

The Chairperson suggested that the questions be considered the following Tuesday.

Mr Asiya reminded members that 9 August was Women’s Day. He congratulated all women on this event to honour their role in the struggle, and wished them a successful Women’s Day.

The Chairperson associated himself and his Committee Members with these sentiments.

The meeting was adjourned.

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